IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 23/08/2002
CORAM
THE HON'BLE MR. JUSTICE K. SAMPATH
S.A.No.1971 of 1989 and S.A. No.1972 of 1989
and S.A. Nos. 1973 and 1974 of 1989
N. Chelliah Servai,
S/o Nellathambi Servai,
Thambipatti,
Thirupattur,
Pasumpon Muthuramalingam
District. ... Appellant in all
the S.As.
-Vs-
The Executive Authority,
Thirupattur Town Panchayat
Office,
Thirupattur,
Pasumpon Muthuramalingam
District. ... Respondent in all
the S.A.
For Appellant: ... Mr.S. Natarajan
For Respondent: ... Mr.C. Thirumaran for
Mr.S. Mohamed Yousuf
These second appeals are filed against the judgment and decree
dated 28-9-1989 made in A.S.Nos.158/86, 146/86, 147/86 and 157/86
respectively, on the file of the Subordinate Judge, Sivaganga.
:JUDGMENT
The following substantial questions of law have been framed
for decision in the second appeals:
“1. For assessing the value of the property for the purpose of house tax,
should not the Authorities determine fair rent for the building applying the
provisions for arriving at the fair rent under the Rent Control Act?
2. Can the increased tax be demanded with retrospective effect?
3. Should not the executive Authority give the reasons in Exs.A-1 to A-5 for
increasing the house tax, to enable the plaintiff to avail the remedy provided
to be effectively utilised?
2. Contending that the Executive Authority, Thirupattur
Panchayat, had increased the annual value of the various buildings belonging
to him and correspondingly the property tax, the appellant filed the suits
before the District Munsif’s Court, Thirupattur, seeking a declaration that
the increase in tax was not valid and for injunction restraining the defendant
Panchayat from collecting the tax at the revised rate.
There were five special notices for increase of house tax
issued under Rule 9(3) of the Rules framed under Section 112(2) of the Madras
Village Panchayat Act, 1950. O.S.No.234/83 relates to notice for Door
No.7/8-1; O.S.No.235/83 is for Door No.7/8-2; O.S.No.236/83 relates to Door
No.7/8-3; and O.S.No.237/83 relates to Door No.7/8-4. The notices were marked
as Exs.A-1 to A-5 respectively before the trial Court. It was contended that
the respondent had no power to fix the value of the building and tax
arbitrarily and that the principles for fixing the fair rent under the Rent
control Act had to be applied and as the respondent had not followed the
procedure, the suits came to be filed.
3. The trial Court accepted the case of the appellant and
decreed the suits and the notices were set aside. The respondent Panchayat
filed appeals A.S.Nos.146, 147, 157 and 158 of 1986 before the Sub Court,
Sivaganga. The learned Subordinate Judge, by common judgment allowed the
appeals and dismissed the suits. It is as against the said dismissal, the
present second appeals have been filed.
4. The learned Counsel for the appellant Mr.S. Natarajan
submitted by relying on several decisions of the Supreme court and this Court
that the notices issued by the respondent have been so issued arbitrarily
without bothering to fix the annual value on the basis of the fair rent
obtainable on the various items. According to the learned Counsel, none of
the notices gives any reason for increase in the annual value and for
consequent increase in the tax.
5. Except for one notice, all the other notices give the
reason for increase as the increase in the rent received by the appellant.
The notices further say that the appellant could within 30 days from the
receipt of notice file his objections to the revision before the same
authority. The appellant did not go before the respondent but chose to
approach the Civil Court. The learned Subordinate Judge, while allowing the
appeals filed by the respondent observed as follows:
“That the notices clearly mentioned that there was revision in the rent
received by the appellant in respect of each of his properties, that in any
event, the notices clearly stated that the appellant could approach the
respondent within a month and without approaching the respondent, he had gone
to the Civil Court.”
and this would be clear from the notices themselves. Only on this short
ground, the appeals were allowed. The Panchayat had a resolution passed and
pursuant to the resolution, the notices had been issued. The appellant had
not approached the Panchayat within the stipulated 30 days. Notices Exs.A-1
to A-5 are all dated 7-6-1983 and the plaintiff within 30 days from the
receipt of notices, should have approached the respondent; instead he filed
the suits on 8-8-1983.
6. In my view, it cannot be construed that the respondent had
arbitrarily revised the annual valuation and consequently the tax payable by
the appellant. The notices are in the nature of show cause having regard to
the fact that the appellant had revised the rent he was receiving from his
tenants.
7. Let us now refer to the various decisions relied on by
Counsel.
In THE GUNTUR MUNICIPAL COUNCIL VS. THE GUNTUR TOWN
RATEPAYERS’ ASSOCIATION, ETC.(1971(II) MLJ (SC) 7) which arose under the
Madras District Municipalities Act, Act V of 1920, the Supreme Court held
interpreting Section 82(2) of the Madras District Municipalities Act that,
“the provisions for the fixation of annual value according to the rent at
which lands and buildings may reasonably be expected to be let from month to
month or from year to yea less the specified deduction and that the test
essentially is what rent the premises can lawfully fetch if let out to a
hypothetical tenant. The Municipality is thus not free to assess any
arbitrary annual value and has to look to and is bound by the fair or the
standard rent which would be payable for a particular premises under the Rent
control Act in force. In this respect no distinction can be made between
buildings the fair rent of which has been actually fixed under the Rent
Control Act and those in respect of which no such rent has been fixed.”
That was a case where there was a general revision of the rental values of the
houses and the buildings effected by the Guntur Municipality in the year 1960
for the purpose of assessment of tax and suits were filed for a declaration
that such general revision was ultra vires and illegal and for a consequential
relief of a permanent injunction restraining the Municipality from acting on
the said notices issued to the tax payers. It was found that the Guntur
Municipality had not followed the fair rent procedure contemplated under the
corresponding Rent Control Act and ultimately, the decrees granted by the
Courts below were modified by the Supreme Court by declaring that the general
revision made by the Guntur Municipality by increasing the rental valuation of
houses and buildings beyond the fair rent determinable under the Rent control
Act in force for the period of assessment was illegal and ulta vires and a
permanent injunction was issued restraining the Municipality from realising
any amount in excess of such tax which might be found due on the valuation
fixed according to the principles laid down in the judgment.
The Supreme Court stressed that the assessment of valuation
must take into account the measure of fair rent as determinable under the Act
and it may be that where the Controller has not fixed the fair rent the
municipal authorities will have to arrive at their own figure of fair rent but
that can be done without any difficulty by keeping in view the principles laid
down in the Rent Control Act for determination of fair rent. The Supreme
Court also expressed that the procedural difficulties should not stand in the
way. “When it comes to fixing the annual value, the law is and appears to be
well settled that the assessment of valuation for the purpose of tax must be
made in accordance with and in the light of the provisions of the Rent Act in
force during the period of assessment.”
8. In S. RAMASWAMY VS. THE COMMISSIONER, CORPORATION OF
MADRAS (197 7(II) MLJ 457) a learned Judge of this Court observed as follows:
“Wherever buildings are subject to rent control restriction, the rental value
has to be fixed with reference to the fair rent if any, fixed under the
statutory provisions for the building and if no fair rent has been fixed by
the Rent Controller the municipal authorities have to apply the provisions of
the Rent control Act and determine the fair rent for the building before
assessing the property to tax.”
9. In NEW DELHI MUNICIPAL COMMITTEE VS. M.N. SOI AND
ANOTHER (AIR 1 977 SC 302) it has been held that,
“where a rent is higher than that which can be legally demanded by the
landlord and actually paid by a tenant despite the fact that such violation of
the restriction on rent chargeable by law is visited by penal consequences,
the Municipal authorities cannot take advantage of this defiance of the law by
the landlord. Rating cannot operate as a mode of sharing the benefits of
illegal rack-renting indulged in by landlords for whose activities the law
prescribes condign punishment.”
10. The decision in K.M.S. ABDUL HASAN VS. THE TIRUVARUR
MUNICIPALITY (1978(I) MLJ 121) reiterates the same principles. It was found
in that decision that the Commissioner of the Municipality concerned had
arbitrarily fixed, though in a bona fide manner the reasonable rent that the
properties would fetch and that the rental value had not been arrived at in
conformity with the proper principles applicable.
11. In DEVAN DAULAT RAI KAPOOR ETC. ETC. VS. NEW DELHI
MUNICIPAL COMMITTEE AND ANOTHER (AIR 1980 SC 541) the same principle is
reiterated.
“Where a building %is governed by the provisions of Rent Control Legislation
the landlord cannot reasonably be expected to receive anything more than the
standard rent from a hypothetical tenant and the annual value of the building
cannot therefore exceed the standard rent. Even in case of a building in
respect of which no standard rent has been fixed within the prescribed period
of limitation and thus the tenant is precluded from making an application for
fixation of standard rent with the result that landlord is lawfully entitled
to continue to receive the contractual rent, the annual value must be limited
to the measure of standard rent determinable under the Rent Act and cannot be
determined on the basis of the higher rent actually received by the landlord
from the tenant. Even if the standard rent has not been fixed by the
controller, the landlord cannot reasonably expect to receive from a
hypothetical tenant anything more than the standard rent determinable under
the Act and this would be so equally whether the building has been let out to
a tenant who has lost his right to apply for fixation of the standard rent or
the building is self-occupied by the owner. The assessing authority would, in
either case, have to arrive at its own figure of the standard rent by applying
principles laid down in the Delhi Rent Control Act, 1958 for determination of
standard rent and determine the annual value of the building on the basis of
such figure of standard rent.”
12. In THE MUNICIPAL COUNCIL TIRUVARUR VS. TAJ PRAKASHA
THAIKAL ESTATE (1981(1) MLJ 197) the Municipality had not complied with the
provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act and
assessed the annual value for the purpose of municipal tax without recourse to
the Rent Control Act and this Court quashed the notice.
13. In MAGDOOM SHERIFF @ SULTAN SHERIFF VS. KANCHEEPURAM
MUNICIPALITY (1993(2) MLJ 262), a learned Judge has followed the same ratio as
in the earlier cases.
14. In INDIA AUTOMOBILES (1960) LTD. VS. CALCUTTA MUNICIPAL
CORPORATION AND ANOTHER (2002(3) SCC 388) the Supreme Court observed as
follows:
“The basis for determination of annual rent value has to be the standard rent
where the Rent Control Act is applicable and in all other cases reasonable
determination of such rent by the municipal authorities keeping in view
various factors as indicated in the judgment including the rent which the
tenant is getting from his sub-tenant. In appropriate cases the owner of the
property may be in a position to satisfy the authorities that the gross annual
rent of the building of which the annual valuation was being determined cannot
be more than the actual rent received by such owner from his tenant. The
municipal authorities shall keep in mind the various pronouncements of the
Supreme Court, the statutory provisions made in the specified Municipal Acts,
keeping in mind the applicability or non-applicability of the Rent act and the
peculiar circumstances of each case, to find out the gross annual rent of the
building including service charges, if any, at which such land or building
might, at the time of assessment, be reasonably expected to let from year to
year in terms of the provisions of the Act concerned.”
In that case, the Supreme Court referred to all the earlier cases and evolved
a formula for fixing the annual rental value.
15. The Supreme Court categorised the earlier decisions into
two groups, one group dealing with the municipal laws of some States which do
not expressly include application of the Rent Restriction Acts in the matter
of determination of annual value of building for the purposes of levying
municipal taxes and the other group dealing with the municipal laws which
expressly exclude application of the Rent Restriction Acts in the matter of
determination of annual value of land or building on rental method. Whereas
in the first category of cases the determination of annual value has to be
made on the basis of fair or standard rent notwithstanding the actual rent,
even if it exceeds the statutory limits. In the other group where the
restriction in the Rent Acts has been excluded, the determination of annual
value of the building on rental method is referable to the method provided
under the relevant Municipal Act.
16. It has to be noted that none of the cases referred to
above relates to determination of fair rent in the Panchayats where the Rent
Acts are not made applicable. There does not appear to be any decided case on
the point.
17. The decision in K. JAYAPRAKASH VS. THE EXECUTIVE
AUTHORITY TIRUTHANGAL TOWN PANCHAYAT (1982(1) MLJ 18 = 92 LW 609) arose under
the Panchayat Act, 1958. That was a case when the Executive Authority of the
Town Panchayat issued a special notice of house tax amendment under Rule 10(3)
of the Rules issued under Tamil Nadu Panchayats Act, 19 58 without disclosing
the reasons, which prevailed for making a special revision. The learned Judge
held that,
“Rule 10(3) enables the Executive Authority to make a special revision of
house tax, but it can be done only after intimating by a special notice to the
owner or occupier of the house that the petition for revising the assessment
will be considered, if it reaches the Panchayat Office within 30 days from the
date of service of such notice.”
According to the learned Judge, it is not sufficient to merely issue a special
notice staightaway to enhance the tax unless the representations made by the
petitioner opposing the proposed enhancement of tax had been considered and
disposed of. The notice served on the petitioner in that case did not state
the grounds which prevailed upon the executive authority to revise the tax
demands and in the absence of such disclosure, as held in DALAVAI VS.
GOVERNMENT OF TAMIL NADU (197 8(1) MLJ 93), whenever special notice is issued,
it is obligatory on the part of the concerned tax authority to disclose the
reasons arrived at therein. The learned Judge further held that,
“when the rules themselves provide for a revision petition, unless the
assessee knows the grounds on which enhancement has been made, it would not
enable him to prefer effectively a revision petition and that remedies
provided under the Rules or enactments cannot be reduced to in effectiveness.
To make them effective and purposeful remedies, particularly when an appeal or
revision is provided, it is incumbent on the original authority to state the
reasons for the conclusion arrived at. Therefore, it is all the more
necessary for the executive authority to furnish the reasons, so that the
remedy provided under the Rules could be effectively and successfully utilised
by affected parties.”
The learned Judge remitted the matter to enable the respondent to deal with
the matter afresh by passing an order justifying the enhancement. This is the
only decision relating to enhancement of property tax dealt with by a
Panchayat. Admittedly, Rent Control Acts have not been made applicable to the
Panchayat in question.
18. We have therefore to find out whether the special notice
disclosed any reason for enhancement. Except for Ex.A-2, the other notices
have given the reason for enhancement as increase in rent by the landlord. It
is further provided in the various notices that the landlord could approach
the same authority for raising his objections questioning the enhancement.
This has not been done by the appellant at all. Instead, he rushed to the
Court as already noted.
19. The matter has been pending for nearly 20 years in the
Court, with the result that there has been no subsequent quinquennial
revisions. Pending the second appeals, as an interim measure where the
enhancement had doubled, the appellant had been directed to pay 50% of the
revised tax and in other cases where the increase was negligible, he had been
directed to pay the full tax. Because of the pendency of the appeals, the
Panchayat had not embarked on quinquennial revisions. As already noted, the
appellant should have approached the respondent itself by filing his
objections within a period of 30 days.
20. The case decided in K. JAYAPRAKASH VS. THE EXECUTIVE
AUTHORITY, TIRUTHANGAL TOWN PANCHAYAT (1982(1) MLJ 18) is clearly
distinguishable. That was a case where tax had been enhanced without any
reasons being disclosed and the appellant was directed to approach the
revisional authority within 30 days. This is a case where some reasonhad been
given and the appellant was directed to approach the same authority by filing
his objections to the revision.
21. It would be worthwhile to extract the observations of the
Supreme Court made in SRIKANT KASHINATH JITURI VS. CORPORATION OF THE CITY OF
BELGAUM (1994(6) SCC 572), which is as follows:
“We feel compelled to express our doubts as to the soundness and continuing
relevance of the view taken by this Court in several earlier decisions that
the property tax must be determined on the basis of fair rent alone regardless
of the actual rent received. Fair rent very often means the rent prevailing
prior to 1950 with some minor modifications and additions. Property tax is
the main source of revenue to the municipalities and municipal corporations.
To compel these local bodies to levy and collect the property tax on the basis
of fair rent alone, while asking them at the same time to perform all their
obligatory and discretionary functions prescribed by the statute may be to ask
for the impossible. The cost of maintaining and laying roads, drains and
other amenities, the salaries of staff and wages of employees – in short, all
types of expenditure have gone up steeply over the last more than forty years.
In such a situation, insistence upon levy of property tax on the basis of fair
rent alone – disregarding the actual rent received – is neither justified nor
practicable. None of the enactments says so expressly. The said principle
has been evolved by Courts by a process of interpretation. Probably a time
has come when the said principle may have to be reviewed.” (emphasis supplied)
22. By filing the suits and keeping the matter pending for
nearly 20 years, the Panchayat has been put to enormous loss. At least with
regard to three cases where the revision was very nominal, the appellant
should have refrained from taking recourse to civil proceedings. Where the
revision has been 7 or 8 times the original assessment which incidentally it
must be noted was in 1969-70, the appellant should have gone before the
respondent and raised his objections as contemplated under the provisions of
the Panchayat Act. As rightly pointed out by Mr. Thirumaran, the learned
Counsel for the first respondent, the appellant nowhere stated that the Rent
Control Act had not been followed.
23. In DINDIGUL ANNA DISTRICT TAX PAYERS SANGAM ETC. VS.
GOVERNMENT OF TAMIL NADU ETC. & ANOTHER (1994(2) LW 715 = 1994 Writ L.R.
805), it has been held that the special notice served by the Executive
Authorities of the Municipalities under Rule 9 on the owners and occupiers of
properties was held to be not in accordance with the principles laid down by
this Court as no reason was stated in the special notices for enhancement of
property tax and therefore the special notices could not be sustained and the
notices were quashed. The Bench directed the Municipalities in question to
issue fresh special notices under Rule 9 to the assesses giving reasons for
the enhancement of the property tax and it further stated that on receipt of
such notices, it was open to the members of the petitioners to file their
objections or apply for revision of the proposed enhancement. The appellant
cannot say that no reason at all was given in the present case.
24. As already pointed out, except for one, all the other
notices have given the reason for enhancement. The appellant ought to have
approached the authority and the same not having been done, I do not find any
acceptable ground for allowing the second appeals. The substantial questions
of law do not at all arise for consideration. The second appeals fail and
they are dismissed. However, there will be no order as to costs.
23-8-2002
Index: Yes
Internet: Yes
IGP
To
1. The Subordinate Judge,
Sivaganga (with records).
2. The District Munsif,
Sivaganga.
3. The Record Keeper,
V.R. Records,
High Court,
Madras.
K. SAMPATH, J.
Judgment
in
S.A.Nos.1971 to 1974/89